North Dakota's Exports to China Plummet, California Holds Strong

Economists with American Farm Bureau Federation crunched the 2018 export data to show the impact of the trade war, with states like North Dakota and Alabama hit the hardest.
( American Farm Bureau Federation )

The trade battle between the U.S. and China continues to weigh on agriculture. Fresh data from U.S. Department of Agriculture puts it into perspective, showing some states saw exports decrease more than 80 percent to China in 2018.

“When USDA released the final December data and completed the 2018 calendar year worth of agricultural export data in March, we wanted to see what ag exports were actually like in 2018, and if the numbers were as bad as we expected,” says Veronica Nigh, an economist with American Farm Bureau Federation.

Nigh says the numbers show the U.S. lost $10.4 billion worth of ag exports to China from 2017 to 2018, which is a 53% drop in a single year. While North Dakota saw exports drop 94% and Alabama lost 87% in ag exports to China in a single year, Nigh found states like California and Wyoming were unfazed overall by the loss of a major market.

“What we saw as we looked across the data was diversity in production and exports is king,” says Nigh. “For those states like North Dakota, for whom soybeans is a really large component of their total exports, they got hit really hard when China added the additional 25% tariff. So, when we look across all the states, those states that have a pretty high concentration in a single commodity, for which China was able to find a competitor’s product, they got hit pretty hard in 2018.”

Nigh says soybean exports to China eroded by $9 billion in 2018. Commodities like wheat, dairy products and hides and skins saw total losses of more than $100 million from 2017 to 2018.

She says when you dig into the exports of a state like California, producers growing and producing commodities like dairy, cotton and fruit and vegetables saw immense pain from the tariffs and trade war. However, when you look at the total impact, it was unchanged, as those lost markets were masked by other export markets that excelled in 2018.

“The largest export item from California to China is tree nuts, and in 2018, we saw exports of tree nuts to China almost increase by 50 percent, in spite of the tariffs,” says Nigh. “That’s a pretty interesting story that’s masking the declines we are seeing in other products.”

She says it goes back to a diversity of products and exports. The more one state grows and exports, the better off the state’s producers are faring in the current tense trade environment.

“That diversity of production and exports is masking a lot of what’s happening on the ground,” says Nigh. “Some producers actually did fairly well in the Chinese market in 2018, whereas other felt the trade war pretty hard.”

Another state showing resiliency with ag exports in 2018 was Arkansas. Data shows exports shot up 240% last year. Nigh says sorghum exports attributed to such strong growth, as those shipments and purchases were made prior to the additional 25% tariff applied last spring.

Producers feeling the effects of the trade war most are searching for answers; answers as to when the trade war will finally cease. The answer to that question doesn’t seem to be easy, as U.S. Trade Representative Robert Lighthizer told lawmakers in mid-March, the possible trade agreement in writing has grown to 110-120 pages. While it’s not a done deal, China is starting to dabble in the U.S. market again, buying commodities impacted the most by the trade war.

“I think it’s possible we are close enough to a trade deal, that China might already be buying US products,” says DuWayne Bosse of Bolt Marketing. “Look at our lean hog market as an example. Pork cutouts rallied in March with a sharp rally in lean hog futures. Ethanol stocks dropped 530 million gallons during that same time. Did China already start buying our products? If China knows they are going to sign a trade deal soon, why not buy a few US commodities or futures contracts before the deal is signed?”

USDA’s data showing the massive drop in ag exports to China is alarming to many economists; some fearing its market share that may take decades to regain. However, Bosse is more optimistic.

“I believe we can gain all the lost market share back eventually,” says Bosse. “Any trade deal at all should be good for U.S. agriculture. Remember U.S. agriculture had a great deal before. Maybe I’m overly optimistic, but if China is serious about narrowing the trade surplus, buying a lot of U.S. ag products makes the most sense. “

He admits regaining the lost market share in China won’t happen overnight, especially not for soybeans.

“I would not recommend holding all your old crop soybeans waiting for a China deal,” says Bosse. “I look at a trade deal with China as a friendly new crop story. The time to sell 2018 soybeans was last spring.”

Deal or no deal, Bosse says time is running out to see a cease-fire between the U.S and China. As carryout of major commodities grow, cash prices are still showing prices below break-even for some producers. If prices don’t improve soon, farmers will be planting into even more uncertainty than last year.